AMBA stock in the last year plunged 40% following concerns about competition from other chipmakers, declining sales growth, as well as contracting margins.
However, Ambarella Inc.’s (NASDAQ:AMBA) stock has recovered this year, gaining close to 30%, with some investors remaining optimistic about the stock making a long-term recovery. AMBA stock is trading higher by 1.0%, selling at $46.43 in Thursday’s morning session.
Customers Preferring Intel’s AI Enabled SoCs
Ambarella is known for the production of SoCs for dash cams, action cameras drones, and security cameras, as well as other devices. Most of Ambarella’s revenue used to come from GoPro (NASDAQ:GPRO), but that was reduced to an insignificant percentage of sales in 2018 because of declining demand for GoPro cameras and GoPro starting to use non-Ambarella SoCs. This led to Ambarella diversifying into other markets.
Some of Ambarella’s other customers, including DJI Innovations and Hikvision, also started using alternative SoCs. DJI and Hikvision, for example, began ordering from Intel Corporation (NASDAQ:INTC), because Intel adds AI capabilities to the image processing SoCs.
AMBA Stock: The Launch of the New S6LM SoC
In a move to counter Intel, AMBA stock has since partnered with Hella and Smart Eye for the production of CV Series chips. The company has launched a new S6LM SoC that merges cyber security, advanced image processing, and low power consumption in a single package.
In fiscal 2019 ended January 31st, the company’s revenue dropped 23% relative to 2018 when it dropped 5%. The decline in revenue is a result of a decrease in demand for its SoCs in the market. However, sales of security cameras and automotive SoCs increased by single digits.
Ambarella has not provided full-year guidance but according to Wall Street estimates the company expects a revenue drop of 7% for FY2020. With the company diversifying into new markets it will gradually reduce reliance on consumer electronics customers but may face competition from Intel. It is yet to be seen whether AMBA stock will maintain the latest rally.
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